While the world is preoccupied with the horrific genocide in the embattled Gaza Strip, Israel is killing hundreds of Palestinians, seizing more land and strangling the occupied West Bank economically.
On 22 May, following the International Court of Justice decisions against Israel and the recognition of Palestine by three European countries, far-right Israeli Finance Minister Bezalel Smotrich took “harsh punitive measures” against the Palestinian Authority. Among these was blocking the transfer of tax revenues collected by Israel on the PA’s behalf, which may lead to the collapse of the authority.
Since its creation under the 1993 Oslo Accords, the PA has been restricted by political, security and economic agreements imposed by Israel and its allies. One of the most important is the 1994 Paris Economic Agreement which was supposed to be temporary for five years. It established the dependency of the Palestinian economy on the Israeli economy and gave the occupation state the tools to make this temporary agreement permanent. Essentially, the agreement integrated the Palestinian economy into Israel’s through a customs union, with Israel having control of all borders, both its own and those of the Palestinian Authority. This means that Palestine remains without independent gates to the global economy. According to the agreement, the Israeli government is responsible for collecting taxes on goods imported to the West Bank and the Gaza Strip, which it transfers to the PA treasury in exchange for three per cent commission.
It is assumed that this money will be transferred smoothly to the PA at an average of 190 to 220 million US dollars per month. The PA relies on these funds to pay the salaries of its employees and fulfil its obligations towards the running expenses of its institutions.
Smotrich’s decision is not the first that the Israeli government has taken against the PA and the Palestinian economy in general. It is an extension of a series of declared and undeclared steps to undermine the authority. This is because the PA represents a potential government of a future Palestinian state which has always been opposed by successive Israeli governments, whether right- or left-wing.
Israel has always used the tax revenue to put pressure on the PA and undermine the Palestinian economy; it is not a response to 7 October.
The transfers have been blocked under many pretexts, including punishing the PA for any political step it takes, such as joining the International Criminal Court in 2015, for example. Indeed, the occupation state has been deducting part of the funds systematically since 2019, under the pretext that the PA pays stipends to the families of Palestinian prisoners and martyrs, which Israel describes as “support for terrorism”.
Since 7 October, the Israeli occupation government has also deducted from the tax revenue the amount that the PA normally pays for its institutions in the Gaza Strip, which amounts to around $75 million per month, leading to a major economic crisis. It is clear that Israel wants to separate the West Bank completely from Gaza, although both are occupied Palestinian territories and part of the envisaged independent state of Palestine.
In September last year, Palestinian Finance Minister Shukri Bishara announced that Israel was withholding $800m from the PA. According to data from the finance ministry in Ramallah last month, the total amount of tax revenue payments withheld by Israel stood at $1.6 billion, equivalent to 25-30 per cent of the PA’s total annual budget.
This has led to an unprecedented financial deficit in the PA treasury, threatening its ability to provide basic services such as health, education and security, and pay the salaries of public employees who have been receiving partial salaries for years. Because of these deductions, the Palestinian government has basically been unable to pay the full wages of its employees since November 2021, and was committed to paying 80-85 per cent of them until the outbreak of the war against the Palestinians in Gaza. This percentage has gradually decreased to 50 per cent over the past two months. Public servants are now unable to pay their monthly financial obligations to banks and schools.
Palestinian public institutions have reduced working hours in order to save money, which has led to a reduction in services, most notably health and education in schools and universities. Teaching is mostly done online.
Palestinian public servants – of which I am one — have not received a full salary since 2021, and the total arrears owed is the equivalent of six months’ full salary. Collectively, this amounts to around $750m, in addition to the debts owed to the private sector of $800m, which has had a major effect on private hospitals and pharmaceutical companies. Unable to fulfil its own financial obligations, and with reduced purchasing power for goods and services, the private commercial and services sector has been paralyzed.
In addition to government spending, especially the salaries of 147,000 public servants, the Palestinian economy is based on two other pillars that have been damaged severely since 7 October: the Israeli labor market and the private sector. Israel has prevented Palestinian workers from entering the occupation state, meaning that 200,000 of them have lost their sole or main source of income and are unemployed.
In turn, this has reduced the purchasing power of Palestinian families, which has had a knock-on effect on private businesses and increased unemployment. An estimate 500,000 Palestinians are now unemployed in the occupied West Bank as thousands of jobs have been lost.
Unemployment is at an unprecedented level.
The decline of financial support for the PA from Arab states has made matters even worse. Moreover, the authority has reached its borrowing limit with the banks, which has made it even harder for employee salaries to be paid, and so the spending cycle continues to spiral downwards.
All of this has led to the near paralysis of the Palestinian economy and put great pressure on ordinary citizens who can no longer find employment and have little or no savings to cover the basic necessities. This threatens to trigger major social, political and economic crises.
On top of all of this must be added the fact that Israel has killed more than 500 Palestinians in the West Bank since October, and arrested 9,000, most with neither charge nor trial. Refugee camps and cities across the occupied territory have seen vital infrastructure destroyed in vicious acts of collective punishment aimed at undermining legitimate anti-occupation activities.
We Palestinians in the occupied West Bank feel ashamed to talk about our plight because of the horror of the unprecedented genocide taking place before our eyes in Gaza. We prefer to remain silent so as not to divert attention from what is happening there. We understand that Israel seeks to separate Gaza from the West Bank in order to wipe out any level of solidarity within a united Palestinian society. The fact is that we in the West Bank would rather starve along with our brothers in the Gaza Strip than see the Palestinian Authority stop fulfilling its obligations towards them and towards the families of the martyrs and the wounded.
-A Palestinian journalist who lives in Ramallah, Fareed is a farmer and political and environmental activist. His article appeared in MEMO.
